Malta: Malta Clarifies VAT On Short-Term Yacht Charters
20 August 2013
Posted by: Author: Lorys Charalambous
Author: Lorys Charalambous
The Maltese Value Added Tax Authority has released new Guidelines on the tax treatment of short-term yacht chartering contracts.
Malta defines the short-term chartering of a yacht as an agreement whereby the yacht owner or operator contracts the use of the yacht for a consideration with a crew or on a bare boat basis, for not more than 90 days.
The short-term chartering of a yacht is a supply of a service taxable at the standard rate of VAT in Malta, which is 18 percent. However, subject to certain conditions, the taxation of this supply falls outside the scope of VAT for the portion of the yacht's use outside the territorial waters of the European Union.
The Guidelines seek to clarify rules governing the calculation of VAT liability where a vessel is used partly outside EU territorial waters, released in recognition of the challenges of ascertaining what portion of a voyage takes place within, and outside of, EU waters.
The guidelines set out to establish the estimated percentage portion of the charter based on the time that the yacht is made use of within the territorial waters of the EU, according to the length of the yacht and its means of propulsion (power or sailing).
If the voyage meets the requirements set out in the Guidelines, the following percentage of the charter is deemed to be liable to Maltese VAT:
- Sailing boats or motor boats over 24 meters in length:30 percent (an effective rate of 5.4 percent);
- Sailing boats between 20.01 and 24 meters in length, and motor boats between 16.01 and 24 meters in length: 40 percent (an effective rate of 7.2 percent);
- Sailing boats between 10.01 and 20 meters in length, and motor boats between 12.01 and 16 meters in length: 50 percent (an effective rate of 9 percent); and,
- All other boats: 100 percent, ie. subject to the full 18 percent rate.